Title: Consequences of investment contract duration on the valuation of firms in maturity stage

Authors: Madalena Delgado; Renato Pereira; Álvaro Dias

Addresses: Instituto Superior de Estudos Interculturais e Transdisciplinares, PIAGET, Campus Universitário de Almada, Quinta da Arreinela de Cima, 2800-305 Almada, Portugal ' Universidade Autónoma de Lisboa, Rua de Santa Marta, 47 – 3º, 1150-293 Lisboa, Portugal; ISCTE-IUL, Lisboa, Portugal ' Instituto Superior de Gestão, Rua Vitorino Nemésio, 5, 1750-306 Lisboa, Portugal

Abstract: Investment contract duration is a key parameter for venture capital funds operation. Variables influencing the decision around this parameter are usually treated in general principles in the classical financial literature leaving plenty of room for context sensitive research. As such, we studied variables influencing investment contract duration by investigating the performance of mature Portuguese firms that have been (partially) held by venture capital funds. Using a sample of 38 firms, sold out by venture capital funds between 1995 and 2004 we evaluated the performance of these firms using performance and sustainability indicators. We found evidence that sales growth, exports, book value, headcount and a good coverage of ISO standards implementation influenced the investment contract duration.

Keywords: investment contract duration; venture capital; divestiture; firm maturity; firm valuation; Portugal; performance indicators; sustainability indicators; sales growth; exports; book value; headcount; ISO standards; sustainable development.

DOI: 10.1504/WREMSD.2015.068580

World Review of Entrepreneurship, Management and Sustainable Development, 2015 Vol.11 No.2/3, pp.217 - 231

Published online: 06 Apr 2015 *

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